UK Government to introduce digital services tax

Philip Hammond discusses the Budget at No 11 Downing Street

They argued that big U.S. tech firms could absorb the costs, while European ones would struggle, warning that a digital services tax "will have a disproportionate impact on European companies, resulting in unfair treatment".

In his announcement, Hammond said the United Kingdom expects to earn more than $500 million a year when the proposal takes effect in April 2020. The Treasury projects that the tax will generate £275m in 2019-20, rising to £370m in the following year, and reaching £440m by 2022-23.

"The rules have simply not kept pace with changing business models", Philip Hammond, chancellor of the exchequer, said in a budget address to Parliament on Monday.

The scheme, which offers a discount of £1,500 per office in England in an attempt to encourage local press back into town centres, for a further year.

Hammond explained that the rationale behind the proposal was that the UK Government believed it is unfair for businesses to amass revenue in the country without paying any taxes.

Beginning in 2020, the tax would be assessed on "digital services companies" that register minimum annual revenues of £500 million ($640 million) globally. It is expected to raise more than £400 million a year.

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Chancellor of the Exchequer Hammond said Britain would at the same time continue to engage with worldwide partners to come up with a new global agreement, saying this was "the best long-term solution". But with the European Union eyeing a similar digital tax, venues seek safety from abandonment in numbers.

And while the chancellor didn't name Google, Amazon or Facebook directly, he did say he was "already looking forward to my call from the former leader of the Liberal Democrats". From 2006 to 2011, Google paid $16 million in taxes on $18 billion revenue in the UK.

Britain had been leading attempts to reform global corporate tax systems, Hammond said, but progress had been painfully slow and governments could not simply talk forever. At the moment, big tech firms pay very little tax in some countries and more in others: redistributing that burden will mean that some countries will lose out, and their governments are understandably reluctant to agree to a change.

Speaking in the Commons on Monday, Philip Hammond said: "A new global agreement is the best long term solution". Confusingly, that does seem to, however, contradict the Chancellor's speech which referred to global turnovers in excess of £500m.

And he said that, even after the injection of around £2 billion a year into Universal Credit, there would be "millions of losers" from the introduction of the new benefit. And we'll only get £400m from them.

Helen Coward, senior associate in corporate tax at law firm Charles Russell Speechlys, commented: "We now have some shape to the digital services tax - the so-called Amazon tax - being mooted by the government".

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